Star India, the prominent subsidiary of The Walt Disney Company, is facing significant financial challenges just as it prepares to merge with Reliance Industries' media company, Viacom18. The company has reported a staggering standalone net loss of ₹12,548 crore for the financial year ending March 31, 2024. This massive loss stems largely from issues surrounding its media rights deal with the International Cricket Council (ICC).
Notably, Star India secured the ICC's TV and digital rights for four years at the cost of $3 billion, only to find itself having to make provisions amounting to ₹12,319 crore due to complications from this costly deal. Reports indicate mounting expenses, including operating costs, which escalated significantly, jumping more than 68%, where total expenditure surged from ₹18,724 crore to ₹31,548 crore. The advertising revenue saw a considerable decline of 4% to ₹10,736 crore, with subscription revenue seeing only minor fluctuations.
The impending merger with Viacom18, backed by Mukesh Ambani, is viewed as a strategic move to bolster their position within the competitive Indian media and entertainment sector. Following the completion of the merger, the new ownership structure will see Reliance Industries holding 56% of the shares, the Walt Disney Company retaining 37%, and Bodhi Tree Systems—founded by Uday Shankar and James Murdoch—holding 7%.
Rumblings of competition from this merger have already sent ripples through the industry. According to analysis by Motilal Oswal Financial Services, the upcoming Star-Viacom18 integration could present a “double whammy” for rivals like SUN TV, which might struggle against this financially fortified competitor. The report highlights SUN TV's recent quarterly performance where its revenue and earnings before interest, tax, depreciation, and amortization (EBITDA) decreased by 12% and 26%, respectively, compared to the same quarter last year.
SUN TV, bracing for intensified competition, could see declines as advertisers recalibrate their strategies away from traditional channels. The renewal of IPL media rights starting from FY28 could amplify this strain, especially with SUN TV's IPL team, Sunrisers Hyderabad, potentially facing financial setbacks due to lower ad revenues.
Adding to the complexity of Star India's situation, its performance reflects not just the challenges posed by increased competitive pressure post-merger, but fundamental shifts within its operational model. While the company has been successful with other segments, including digital streaming via Disney+ Hotstar, the costs associated with managing such expansive rights and content services have nevertheless proved burdensome.
The loss reported places Star India’s challenges under sharp scrutiny, especially since it continues to operate 77 channels across diverse categories, from entertainment to sports. The integration with Reliance is expected to yield significant operational synergies, potentially creating avenues for recovery. Nevertheless, the initial phase of this merger raises questions about the immediate financial instability this massive entity may be carrying forward.
Star India's difficulties reflect broader industry trends where the dynamics of viewership and advertising are rapidly shifting. The rise of streaming services and digital platforms has changed the advertising ecosystem drastically, with legacy media companies grappling to adapt. The falling advertising revenues signal changing tastes among viewers as younger audiences tend toward digital-first content consumption.
Despite this gloomy financial report, Viacom18 also revealed some notable achievements—its revenue rose 75% to ₹8,032 crore, underscoring the potential for growth amid challenges. The rate of losses indicates significant investments being funneled toward its sports and streaming segments. This implies both companies envision the merger as not just about overcoming short-term losses but about strategically positioning themselves for long-term growth.
Industry experts note this could prompt other media entities to rethink their strategies against the backdrop of increasing consolidations. Historical trends indicate successful mergers often lead to more diversified content offerings, expansion of market reach, and increased bargaining power with advertisers.
The media sector is not just witnessing mergers; it is entering what some are calling the 'Jio Star' era, pointing to Mukesh Ambani's relentless push for market dominance. Whether this new entity can navigate the precarious waters of sizable financial losses and reinvigorate brand trust will be significant moving forward.
The initial financial struggles of Star India provide insight not only on the company itself but on the state of the industry it operates within. Each development offers lessons on the perils and promises of media consolidation. It remains to be seen how Star India and Viacom18 will manage to turn the tides on what has become quite the uphill battle.
